GST & Its Impact on Indian Bike Industry

The new GST has been in the news for over a fortnight now. The latest addition to the tax structure was not a big issue in the initial days when it was first announced. However, as the big day of the implementation is nearing, the anticipation seems to be rising.

GST has been playing a major role in the current automobile market situation. All the people around, who have kept a keen eye on this latest taxation would have been delighted by the fact that most of the automakers doing business in India had offered big discounts as a build up to this.

What is GST?

With the introduction of GST as a single tax fold, the Government has eased off the taxation system under one count. The earlier taxation system had subheads like CST, excise duty, etc. However, the current GST includes everything and is reflected as the total cumulative percent.

On one hand, the introduction of GST has made the complexities simpler. On the other hand, it has raised up several questions from several minds, trying to figure out what it has in store for different segments.

GST on motorcycles

The new GST structure divides the motorcycles into two segments, with different taxes implied. The first segment included all the commuter motorcycles and scooters and others that have engines smaller than 350 cc. The second segment includes all the motorcycles with engine displacement of more than 350 cc.

According to the current taxation heads, all of the categories including CST and excise duty get a total figure of 30% on all the motorcycles, be it commuters or beastly sports bikes. However, with the new GST, the rate for small engine motorcycles (below 350 cc) has been set at 28%.

A simple calculation will make things clearer for you. For example, a 250 cc motorcycle from XYZ company is presently retailed at Rs. 1 lakh (including 30% taxes). After the GST is implemented, the 30% rate is reduced to 28%, getting the motorcycle to be cheaper by around Rs. 1,500.

Hence, now we know that that commuter motorcycles and other motorcycles below 350 cc will induce lesser burden on the company. So get palms clasped tightly and wait for the GST to bring you some waiver on your motorcycle prices.

However, the situation is a little different for motorcycles bigger than 350 cc. This bigger motorcycles will have the same standard 28% GST on them starting from July 1, 2017. But what will burden the manufacturing companies is that this motorcycle will also attract an additional cess of 3%, which will take the total to 31%.

Let’s work out a calculation on this one as well. Say for example a 500 cc motorcycle from XYZ company is priced at Rs. 2 lakhs presently including the 30% present tax. But with the implementation of GST (31% total), there will be an extra 1% that XYZ will have to bear, taking the price to somewhere around Rs. 2.15 lakhs.

So we now know how the new GST will influence the price when we visit the showroom to get the quotation of a motorcycle.

Would it make any difference?

This is something very simple for anyone to answer. Of course, everyone loves discounts and waivers, or any such schemes that would save their pockets from burning entirely. If you are buying a Royal Enfield Classic 350, which has an engine capacity of 346 cc, you will see that the exclusive showroom price is Rs. 1.4 lakh. But the new price will get down to around Rs. 1.38 lakh.

And as far as the price of big engine motorcycles is concerned, they will just be dearer by 1% than the current price. Bajaj Dominar, which has a current tag price of Rs. 1.48 lakh in Delhi, will be more expensive by around Rs. 1,200.

Impact

As we have seen, the changes, be it less or more, are very minimal. The difference on regular motorcycles is just marginal. If a person can pay Rs. 1.48 lakh for a Dominar won’t really mind paying a couple of thousands extra. Hence, the impact on the consumer section is not very harsh even though the taxes have increased on paper.